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Support and Resistance Overview
Support and Resistance are the manually drawn price levels where the buying and selling pressure is significant enough to influence the price level. These price levels act as the barrier to the price from where the price may either bounce back up or down.
Support Level: Support in Hindi we call it सहारा. and as the name suggests it is the price level that provides support to the commodities and stocks as the price tends to fall. The thumb rule of support says, If the security price is being dominated by sellers. It is preassumed that the sellers won’t be able to dominate any longer once it touches the support line. The price of the security will most probably bounce back up and the buyers will retain their position. However, If the price has breached the level, by an amount exceeding some noise, it is likely to continue falling until meeting the next support level.
Resistance Level: Resistance is just the opposite of the Support level. Resistance is a price level that acts as a ceiling and prevents the security price to rise any further. The thumb rule of Resistance says, If the price of the security is being dominated by buyers. It is preassumed that the buyers won’t be able to dominate any longer once the price reaches the resistance level. However, If the price has breached this level, by an amount exceeding some noise, it is likely to continue rising until meeting the next resistance level.
How to draw Resistance and Support levels on Olymp Trade?
Drawing support and resistance lines is damn very easy. Firstly log in to your Olymp Trade account. Next, click on the Indicator button
Select the Horizontal line from the menu.
Now, what you need to do is find the two highs (bullish and bearish) for the resistance level. and place the horizontal above the same.
Similarly, find two lows (bullish and bearish) for the support level. and place the horizontal line below the same.
For more clarity, you can also change the colours of the support and resistance lines. Just click on the pencil icon and choose the colour.
Draw using Trend Lines
One more way via which you can draw support and resistance levels is by using a trend line. Similarly, click on the indicator button and select the Trend line from the menu.
You can place the trendline where you want to start and then extend it horizontally until the point where you want to end it.
How to Trade with Support and Resistance Levels
Trading with Support and Resistance levels is damn very easy. First of all, you need to select the currency. for instance, here I select EUR USD.
Now, you need to spot Support and Resistance lines using the horizontal lines.
Once you have spotted the support and resistance lines. now what you need to do is remember this thumb rule:
If the candle is near the resistance line it will bounce back down in an inverted v shape.
Similarly, If the candle is near to support line it will bounce back up in v shape.
However, If the candle has broken either the support or resistance it will continue until the next support or resistance level.
See, the chart below.
At point no.1, we can clearly see here that the candle is trying to break the resistance level, however, the resistance level acts as a ceiling, and then very soon the candle bounces back down. here, we can place a sell trade.
At Point no. 2, The candle is successful at breaking the resistance level but not for long enough and then the price bounces back down. here, we should wait for the price to fall if it continues to fall place a sell trade.
At Point no.3, The candle, has once again broken the level and touched the support level. It signals an upcoming bullish trend and if it continues to rise place a buy trade
At point no 4, We can clearly take a buy trade here as the candle is touching the support level and has bounced back up properly.
My Trades using Support and Resistance
I took about 7 trades using Support and Resistance. what I did is used a 1-minute time frame chart and as the candle touched the support level I placed a 5-minute buy trade and as the candle was in a rising position I also placed a 1-minute buy trade with the trend. Similarly, when the candle touched the resistance level I place 5-minute sell trades and with the trend, I placed 1-minute sell trades.
I think I have covered everything about Support and Resistance on Olymp Trade by now and you must have understood How to trade and analyse the trend via the same. The best way to understand any Olymp trade winning strategy is by practising the same on the Olymp Trade demo account. I wish you a very best of luck 🙂